9.2熊猫外刊精读|Consumer credit：In praise of buy now, pay later

Consumer credit：In praise of buy now, pay later

A much-maligned form of finance is in fact a useful innovation

【1】NEW FORMS of credit are often met with suspicion. A century ago retailers selling furniture and cars realised they could reach more customers if they accepted payments in instalments. To detractors this was a sign of moral decay: “Beware of the slimy coils of the instalment evil,” blared one advert in the Houston Chronicle in 1926. When in 1958 Bank of America started posting credit cards to customers, it did not take long for opponents to worry about the consequences.

【2】Today the reproachful frowns are aimed at “buy now, pay later” (BNPL). This practice, which lets people pay for things they buy online in instalments, is booming; over $300bn in payments were financed in such a manner last year. Borrowers tend to be younger and less creditworthy than average, which is fuelling concern. Many critics—including Tucker Carlson, a MAGA pundit—fret that the industry preys on the young. Analysts worry that the hidden debt makes it hard to monitor credit risks. Yet BNPL could be a valuable innovation.

【3】New financial products often cause worry because they draw in customers with little experience of credit. Some will undoubtedly be fleeced by charlatans who mis-sell their services. But reaching new customers is generally a good thing. Modern finance is not perfect; the poor and the young are underserved, partly because they often have no credit history. It is only rational for upstarts to fill a gap in the market. If they provide a useful service, they can grow rapidly. After an early spate of fraud, Bank of America’s credit-card business went on to transform payments. Today it is better known by the name it took when it was spun out in the 1970s: Visa.

【4】For some Americans, credit cards can be a trap. Those with low credit scores are more likely to hold revolving balances, carrying over debt rather than paying it off each month. Their heavy interest bills subsidise those with better credit scores, who amass points and other benefits.Panda Foreign Magazine Intensive Reading:Respect for Originality, Piracy Must Be Punished

【5】BNPL is different. Its providers earn most of their money from merchant fees, not debt interest. BNPL borrowers are no more likely to get into debt difficulties than cardholders. Despite the lower credit scores of typical users, BNPL loans have a default rate of around 2%—similar to the share of credit-card payments that were more than 120 days delinquent. BNPL purchases are low-value and do not involve revolving balances, which probably helps.

【6】Critics are right, though, to worry that BNPL loans remain hidden from regulators and other lenders. providers do not supply comprehensive data to credit-reporting firms on their users’ borrowing and repayments. Although they benefit from checking their customers’ credit, they deny other lenders the opportunity to do the same. That raises the possibility that banks will lend to people with hefty BNPL debts, not realising they are riskier than they appear.Panda Foreign Magazine Intensive Reading:Respect for Originality, Piracy Must Be Punished

【7】Some providers say they do not trust credit bureaus to understand this new form of finance; others may see opacity as an advantage, because it attracts borrowers who wish to keep their debts hidden. Despite such concerns, providers should be required to report their data, as Affirm, one of America’s largest BNPL lenders, has recently begun to do. Many providers aspire to reach further into mainstream finance. To achieve those dreams, they must open up.